All payments to individuals in reward for work done, must be made through the payroll system.
An employee will normally be appointed within one of a number of categories of staff, each relating to a particular salary scale. These scales are agreed nationally for all Universities. The principal ones are:
- Clinical academics
- Non-clinical academics and related. (This 'related' includes administrators, librarians, researchers and the like).
- Secretaries and clerical workers
- Halls of residence employees
- National Health Service staff (appointed by the University but paid at NHS rates).
- Manual and Ancillary workers, Craftsmen
Further details regarding conditions of employment and appointment procedures should be obtained from Human Resources.
It is usual, though not guaranteed, for the various salary scales to be increased each year to cover the cost of inflation. The amount of this inflationary increase is agreed nationally for all Universities. The usual dates of implementation are:
|Clinical Academics||1st April each year|
|Non-Clinical Academics||1st August each year|
|Technicians||1st August each year|
|Secretarial and Clerical||1st August each year|
|Halls of Residence||1st August each year|
|Manual & Ancillary||1st August each year|
|NHS Staff||1st April each year|
|Staff on St Andrews College||1st April each year|
Terms and Conditions
Information on the latest pay scales including the level of associated payroll costs, i.e. National Insurance Contributions and pension attributable to each scale point can be found on the Human Resources. website by clicking here. While the basic pay and deductions for income tax, national insurance and pension contributions are of interest to the employee, it is the higher figure i.e. pay plus associated costs which is charged to the Department, the research grant or other project. When the Finance Office refers to salary costs it always means this full cost.
New employees will be contacted by the Payroll Section shortly after their arrival and asked to complete a banking details form. Prompt return of this form is advised as any delay in its completion and return may cause payment difficulties at the end of the month.
Accompanying the banking form is an HM Revenue and Customs P46 form. Employees who have recently been in employment in the UK, or who have been in receipt of unemployment benefit, will have been given an HMRC P45 form by their previous employer or the Department for Work and Pensions (DWP). If an employee holds a current P45 it should be sent to Payroll Section along with the completed banking details form. If not, the P46 form must be completed. Employees entering the UK for the first time or returning to the UK after a period of absence should request form P86 from the Payroll Section.
Payment of salaries is made on a monthly calendar basis in arrears and is credited to the bank or building society account of each employee normally on the last banking day of each month.
National Insurance Contributions
In general, all salary and wage payments to employees are classed as earnings for National Insurance purposes. There are three principal exceptions:
Individuals in receipt of State Pension do not need to make further contributions. The University must be provided with a certificate of age exception certificate (obtainable from the Department of Work and Pensions) as proof that no deduction for National Insurance is due.
If maximum National Insurance Contributions in any particular pay period have already been deducted in another employment, then no further employee's National Insurance Contributions need be deducted from University pay in the same period. Proof in the form of a CA2700 certificate (obtainable from the Department of Work and Pensions) is required by the University in these circumstances. This certificate is renewable annually.
If earnings are below the Earnings Threshold (ET) for National Insurance purposes there will be no liability to pay National Insurance Contributions by the employee or by the employer.
The level of National Insurance contribution depends upon:
- whether he or she is over the state pension age
- the appropriate earnings band into which each employee falls.
The University, as employer, is liable to pay contributions on all earnings above the Earnings Threshold. An individual employee's liability, however, reduces once earnings have reached the upper earnings limit (UEL) - currently £3,750 per month (2017/18).
|Earnings up to £680 per month||0%||0%||0&|
|Earnings above £680 up £3,750 per month||12%||0%||13.8%|
|Earnings over £3,750 per month||2%||0%||13.8%|
An individual's National Insurance number represents his account number with the government. Against that account all National Insurance Contributions are credited. The 'balance' on this account is then used to determine entitlement to certain social security benefits. It is therefore important that an employee's number is correctly quoted in all correspondence relating to National Insurance.
Any employee who is unaware of, or does not possess, a National Insurance number, should contact his or her local Department for Work and Pensions office.
The Income Tax Acts and the Pay As You Earn regulations require that PAYE must be deducted on the making of any payments of, or on account of, any income assessable to income tax under Schedule E. This means all salaries and wages, fees and even, in some cases, expenses. Failure to apply PAYE will result in the tax due (and usually the accompanying National Insurance Contributions) being sought directly from the University in its capacity as employer. The policy followed by the University, in cases where doubt may exist whether tax should be deducted from a particular payment, is to assume that a liability exists to collect tax under PAYE. In the event of the payment being declared by HMRC to be exempt from tax, any amounts previously deducted can normally be refunded either by the University or by HMRC.
Residents in Scotland are subject to the Scottish Rate of Income Tax which is different than for other parts of the UK. If you live in Scotland you should ensure that HMRC have your correct home address to ensure they provide the University with the correct tax code for you. Generally speaking if you live in Scotland your tax code should be prefixed with an "S".
Income Tax - Employed or Self Employed?
It is important to draw a distinction between a person who is engaged under a contract of service, and is thus an employee, and someone engaged under a contract for services under which he or she is considered to be self employed. An employee's earnings will be subject to Schedule E PAYE tax and National Insurance, whilst the self employed person may be paid without any deduction at source. He or she will, of course be liable to disclose the receipt to the Inland Revenue and pay tax and National Insurance Contributions in due course under Schedule D tax regulations.
The law doesn’t define employment and self-employment. Instead a review of past Case Law has identified the various criteria which must be considered in reaching a conclusion about a person’s employment status.
For the vast majority of people, there is no difficulty in deciding whether the terms of their engagement represents a contract for services, in which case they are self-employed, or a contract of service, making them an employee. However, there is a grey area on the border between employment and self-employment that causes most difficulties.
If you can answer ‘Yes’ to the following questions you are probably employed.
- Do you yourself have to perform the work rather than hire someone else to do it for you?
- Can someone tell you at any time what to do or when to do it?
- Are you paid by the hour, week or month? Are you paid for working overtime?
- Do you work set hours, or a given number of hours a week or month?
- Do you work on the premises of the person you work for, or at a place or places he or she decided?
If you can answer ‘Yes’ to the following questions, it will usually mean you are self-employed.
- Do you have the final say in how the business is run?
- Do you risk your own money in the business?
- Are you responsible for meeting the losses as well as taking the profits?
- Are you free to hire other people on your own terms to do the work you have taken on? Do you pay them out of your own pocket?
- Do you have to correct unsatisfactory work in your own time and at your own expense?
- Do you provide the main items of equipment you need to do your job, not just the small tools many employees provide for themselves?
Bear in mind that because you are self-employed in one job doesn’t necessarily mean you will be in your next job. You can even be employed and self-employed at the same time!
Employment Status - Who Decides?
The determination of the correct schedule of charge, ie, Schedule E (employed) or Schedule D (self-employed) falls within the jurisdiction of HMRC. The Finance Office cannot therefore accept letters from accountants, solicitors, heads of departments or individuals in support of self-employed status.
Should an individual be seeking self-employed status then they must, in conjunction with their Head of Department/Authorising Officer, complete the and return it to the Payroll Section. The Payroll Section will on the individual's behalf, contact HMRC who will provide a determination on the correct class of taxation.
Therefore, until such written authorisation is received, it is the policy of the University to make payment for services after deducting Schedule 'E' PAYE tax and Class 1 National Insurance Contributions. Should HMRC determine that the individual is to be treated as self-employed then any Income Tax and National Insurance Contributions deducted within the current tax year will be refunded in full.
National Insurance Contributions - employment status
For tax purposes whether a particular lecturer is employed or self employed depends upon the particular circumstances. For National Insurance Contributions the position is slightly different. The Department for Work and Pensions has special regulations which apply to lecturers for the purpose of determining this charge. If a lecturer is employed under a contract of service he or she will be an employee and liable to pay Class 1 National Insurance Contributions. If a lecturer is not employed under a contract of service, the Social Security Regulations mean that Class 1 National Insurance Contributions will be due unless:
- the lecturer is engaged to lecture on not more than 3 days in 3 consecutive months or;
- the instruction is given as a public lecture which anyone can attend.
Where in doubt, therefore, departments are encouraged to contact the Payroll Section at an early stage in order to establish a particular person’s employment status.
Lecturers engaged by Universities
The following notes apply only to lecturers. The tax treatment of external examiners engaged by universities is currently under review. In the meantime, examiners up to and including first degree level should be treated as employees of the University, from a taxation perspective.
When a lecturer is engaged, a decision has to be made at the outset as to whether the contract is one of employment or self-employment. If the lecturer is an employee, then PAYE tax must, by law, be deducted. National Insurance Contributions for the amounts paid to lecturers who are within the Department for Work and Pensions’ special regulations must also be accounted for (see below).
A full time lecturer will normally be an employee. This follows from the terms and conditions of engagement which usually include some or all of the following features that point towards employment:
- Payment of a salary
- Paid holidays and sick leave
- Availability of pension scheme membership
- No financial risk for the lecturer, control (or right of control) over matters such as conduct and discipline, hours of attendance, where and when lecturers are given and, possibly, detailed control over what is taught (e.g. course to follow a set syllabus), etc.
A part-time lecturer whose engagement covers a complete academic term or longer and who has similar terms and conditions to a full-time lecturer is likely to be an employee. In contrast, someone who is taken on for a whole academic term or year but only for say two or three hours a week, and on different terms and conditions to full-time lecturers, is more likely to fall within the guidance given for occasional lecturers below.
A visiting lecturer who gives a one-off talk or short series of talks on a subject about which he or she has specialist knowledge and which is not part of the core curriculum will normally be engaged on rather different terms and conditions and is likely to be self employed.
Sometimes lecturers are engaged on a less formal basis to give, for example, a series of lectures on a particular topic. They are the group whose employment status for tax purposes is often the most difficult to decide. In each case it is necessary to consider all the circumstances, including:
- The terms and conditions of the engagement.
Control (or right of control) over conduct and discipline, hours of attendance, where and when lectures are given, course content, etc (generally the more extensive control the more indicative it is of employment), e.g. a lecturer required to teach in accordance with a set syllabus would be more indicative of employment than if the lecturer was engaged to talk about a specific subject but was left to determine the content of the lecture.
Whether the individual must undertake the lecturing personally or whether a substitute can be sent (on the lecturer’s part, to send a substitute is a strong pointer towards self-employment although the absence of such a right is not a particularly strong indicator the other way).
Who is to supply the equipment necessary (where the contractual terms require the lecturer to supply his own equipment [e.g. overhead projector and hand-outs] at his own expense this would point towards self employment).
Whether any financial risk attaches to the engagement (financial risk would be a pointer towards self-employment - but most engagements will lack any element of financial risk).
- Factors personal to the lecturer.
The following factors point towards self-employment. But they are only relevant where both university and lecturer intend that the terms of engagement amount to self employment.
Many short-term lecturing engagements with different institutions.
A business approach to obtaining and organising his or her engagements and expenditure in this area of a type not normally associated with employment (e.g provision of office accommodation, office equipment, etc).
Self-employment in a related full-time (or substantial) profession or business where occasional lectures are regarded as part of the individual’s profession or business.
- The intention of the parties to the contract.
A university that wishes to take on an employee has that right. Where a contract, freely signed by both parties, specifically states that the engagement amounts to a contract of service (and the terms and conditions are consistent with that) then that will conclude the matter.
Where a review of other factors indicates that the engagement is on the borderline between employment and self employment a common intention expressed in the contract, whether for employment or self employment, will decide the issue.
Overpayment of Salary
The Finance Office cannot normally make a deduction (other than statutory deductions) from an employee's salary unless the employee has previously given written consent or the contract of employment allows it.
An exception to this is where there has been an overpayment of salary. The Employment Rights Act 1996 allows for an employer to recover overpayments of salary through a deduction of an employee's wages even if this is without prior agreement.
In the event of an overpayment coming to the attention of the Finance Office, a letter will be sent to the individual concerned informing him or her of the overpayment. This letter will also outline the repayment arrangements which may include a repayment plan. If no response is received to this letter a follow-up letter shall be sent to the employee. In the event of no response being received to the second letter, the Finance Office reserves the right to collect the amount due in future consecutive pay periods until the amount due is fully repaid.